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    Cmmon size income statement

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    1. (1 point)
    Key Financial Data
    Dreamscape, Inc. Industry Average
    Ratio For the Year Ended For the Year Ended
    (% of Sales) December 31, 2004 December 31, 2005
    Cost of goods sold 74.5% 70.0%
    Gross profits 25.5 30.0
    Selling expense 8.0 7.0
    Gen. & admin. expense 5.1 4.9
    Depreciation expense 2.4 2.0
    Total operating expense 15.5 13.9
    Operating profits 10.0 16.1
    Interest expense 1.4 1.0
    Net profits before taxes 8.6 15.1
    Taxes 2.4 6.0
    Net profits after taxes 5.2 9.1

    Income Statement, Dreamscape, Inc.
    For the Year Ended December 31, 2005
    Sales revenue $1,000,000
    Less: Cost of goods sold 750,000
    Gross profits $ 250,000
    Less: Operating expenses
    Selling Expense $70,000
    Gen. & admin. expense 48,000
    Depreciation expense 20,000
    Total operating expense $ 138,000
    Operating profits $ 112,000
    Less: Interest expense $ 20,000
    Net profits before taxes $ 92,000
    Less: Taxes $ 36,800
    Net profits after taxes $ 55,200
    Prepare a common size income statement for Dreamscape, Inc. for the year ended December 31, 2005. Evaluate the company's performance against industry average ratios and against last year's results.

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    Solution Summary

    The solution explains how to prepare a common size income statement and use it to evaluate the company's performance

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